New wave of diamond fever sweeps Canada’s Northwest Territories

The famous Northern Lights are definitively not the only attraction in Canada’s Northwest Territories.

Diamond deposits, in the words of one senior geologist, are like pigeons. Where you find one, you're likely to find an entire flock.

That's the guiding logic behind a new wave of diamond mine development and claim staking in the Slave Craton in Northwest Territories. The NWT already serves as host to some of the world's richest diamond mines, starting with Ekati and Diavik, followed by Snap Lake, all in the central corridor of the Slave Craton.

Next to follow is the Gahcho Kue Diamond Project southeast of the prolific Ekati and Diavik diamond mines. When it begins production in 2016, Gahcho Kue is reputed to become one of the largest and richest new diamond mines in the world. This $700 million project has a combined probable mineral reserve estimated at 55.5 million contained carats. De Beers Canada owns 51 per cent of Gahcho Kue and is the operator of the proposed mine. Mountain Province Diamonds, which discovered the Gahcho Kue diamond resource, owns 49 per cent.

Next to Gahcho Kue is the Kennady North Project with four confirmed diamond pipes. Two of the pipes returned diamond sample grades two to three times greater per tonne than Gahcho Kue, as reported by the company.

Circling in the vicinity of Gahcho Kue are projects led by successful veterans of the original 1990's Canadian diamond rush: Randy Turner, CEO of Canterra Minerals; Buddy Doyle, exploration director and vice-president of Margaret Lake; and Patrick Evans, president and CEO of Kennady Diamonds.

Turner discovered the Snap Lake diamond mine. Evans led SouthernEra Resources when it performed much of the foundational geological research in the Slave Craton area two decades ago. Doyle led the team that discovered Diavik. He also was involved in exploration at one of two properties in the area acquired this year by Prima Diamond Corp. (PMD.V).

In mineral exploration, "closeology" — proximity to a mineral resource — can mean a lot, or a little. For a gold deposit, it's usually irrelevant. For diamonds it's a whole different story.

"The best place to seek a high-grade diamond deposit is close to one that has already been identified," explains Dr. Roger Morton, professor emeritus in the Department of Earth and Atmospheric Sciences at University of Alberta.

Prima Diamond Corp. — a comparative newcomer to the diamond exploration business — won the staking rush to acquire the highly prized Munn Lake property north of Gahcho Kue. Its Godspeed Lake property is immediately adjacent to Gahcho Kue on the south and has barely been explored.

"Diamonds tend to be like pigeons. They go around in flocks," Morton says, pointing to Gahcho Kue as the spark for surging interest in the area. "In the Munn Lake area, for example, there is a kimberlite which is the host rock for diamonds."

Interest in the southern Slave Craton took another jump this summer when tonnage estimates in Kennady's Kelvin-Faraday kimberlite corridor increased by 30 per cent, to 10 million tonnes.

With its two properties, Prima is well positioned to take advantage of the excitement. The 14,000-hectare Munn Lake is 40 kilometres northwest of Gahcho Kue and 40 km east of the Snap Lake diamond mine. It has been the site of $6 million worth of exploration, leading to the discovery more than a decade ago of a diamondiferous kimberlite, and huge kimberlite boulders resting at surface some as large as 25 meters in diameter.

SouthernEra Resources, which headed up the exploration team, reported 226 diamonds in a 581-kilogram sample including 62 macro diamonds.

The property also hosts four additional kimberlite indicator mineral trains whose kimberlite sources have yet to be identified, according to the company.

Jody Dahrouge, president of Dahrouge Geological Consulting, staked the properties for Prima.

"Our first read of the Munn Lake kimberlite is that it's a couple-of-metres-wide dike, similar to the Snap Lake Diamond mine," Dahrouge explains. "Then there are a few boulders sitting down-ice that are 25 metres in diameter. How can you squeeze a 25-metre-wide boulder from a two-metre-wide body? It seems to indicate another kimberlite source bigger than the already identified Munn Lake Sill. It might be from a blow, it might be from a pipe located elsewhere."

Dahrouge notes that at Godspeed, "huge swaths of this property have never seen a sample, particularly the southern half. The northern half, the area closest to Gahcho Kue, has really seen very limited sampling. So it's an unexplored jewel, yet to be cracked, in the middle of a kimberlite cluster, which is fortunate for us."

"Diamond exploration is all about closeology and we are in a great area code," Prima President and CEO Robert Bick comments. "Not only is Gahcho Kue a world class diamond resource but within a circumference of 100 kilometres the area is dotted with diamondiferous kimberlites."

Bick noted that the market for diamonds, unlike that for gold and base metal commodities, remains strong. Globally, production has dropped 26 per cent compared to 2005, and newly affluent members of the middle class in China, India and Indonesia are helping to push year-over-year growth in demand for diamonds by 5.1 per cent compounded annually.

One advantage that Prima has over SouthernEra is the advances in geological survey technology over the last 15 years. Godspeed is considered an excellent exploration candidate for using airborne gravity surveys.

Air gravity gradiometry studies would confirm and generate additional targets for future drilling on both Munn and Godspeed Lake.

Neil McCallum, a project geologist with Dahrouge, uses words such as "straightforward" and "simple" to describe the opportunity for Prima.

"The closeology is an important consideration for Godspeed, considering its proximity to Gahcho Kue," McCallum says. "As for Munn Lake, we've got diamondiferous kimberlites and boulders and really nice looking targets based on indicator sampling. Prima has the right real estate in a prolific area. This is clearly a very prospective diamond play."